Law Office of Richard M. Russell
197 Palmer Avenue
Falmouth, Massachusetts 02540

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Estate Planning Basics

Typically, when people think of an “estate plan,” they think of identifying who will receive their property after they’re gone. While an estate plan does address such matters, over the years “estate planning” has come to include addressing the possibility of incapacity during lifetime, because the advantages of planning for this possibility far outweigh failing to plan. In this context, an estate plan typically includes a will, durable power of attorney, health care proxy, and possibly a living trust.

Will: A will is a written document directing the disposition of a person’s individually owned property upon death and usually identifies a person to carry out those directions. The person making the will is referred to as the testator or testatrix and the person to carry out the testator’s directions is referred to as the personal representative. Ordinarily a will does not affect accounts with valid beneficiary designations or property a person owns jointly with another or others. A will might accomplish other benefits--such as providing proper management of property left to minors or younger children.

Durable Power of Attorney: A power of attorney is a written delegation of authority over some or all of the property of the person making the delegation. The written delegation is referred to as a power of attorney, the person making the delegation is referred to as the principal, and the person to whom the authority is granted is referred to as an attorney-in-fact. The attorney-in-fact must act consistent with the directions expressed in the power of attorney. A “durable” power of attorney provides for the continued delegation of authority in the event of the principal’s incapacity: historically the authority of an attorney-in-fact terminated on the incapacity of the principal. In the absence of a “durable” power of attorney, if a property owner loses capacity (due to age, illness, accident, etc.), a probate court proceeding is required for the appointment of a conservator and generally a conservator is granted only limited authority. Thus, a properly drafted durable power of attorney can provide a better remedy than that available in the absence of a durable power of attorney. A power of attorney is revocable by the principal (prior to incapacity) and is terminated by the death of the principal.                            

Health Care Proxy: A health care proxy is a written delegation to another (a health care agent) of authority to make “health care” decisions in behalf of the person making the delegation (the principal) only in the event the principal becomes incapacitated. As with the durable power of attorney, a health care proxy is preferable to the probate court alternative because the health care proxy can grant authority beyond that available from the probate court (particularly withholding or withdrawing life-sustaining treatment when such does not provide benefit). Like the power of attorney the health care proxy is revocable by the principal prior to incapacity.

Combined, the durable power of attorney and health care proxy provide a preferable solution to the probate court alternative. The documents permit the principal to designate person(s) to act on his or her behalf--the preferable designation cannot be guaranteed to be made by the probate court--and allow the principal to tailor how his or her affairs will be managed.

Living Trust: As discussed above, the durable power of attorney and health care proxy are designed to avoid probate court intervention in a person’s affairs during lifetime. The living trust allows a person to avoid probate court intervention following the person’s passing--by placing property in trust and directing in the trust how trust property should be distributed upon passing. A living trust is a written document; the person making a trust is referred to as the settlor or donor; the person(s) to receive trust property are referred to as beneficiaries, and the person(s) to carry out the terms of the trust (for instance, on the passing of the settlor) is referred to as the trustee. Unlike a will, which must be submitted to and approved by the probate court before it will be honored (referred to as probating an estate or simply probate), a living trust can provide for the distribution of property without probate court participation, typically expediting the transfer of property to heirs, avoiding the cost of probate, and providing privacy with respect to these personal matters (probate being a public record). During lifetime--and similar to a durable power of attorney--a living trust can provide for the continued management of a person’s property in the event of incapacity. Like a will, a living trust may be revoked by the settlor prior to incapacity.

Funding a Trust: A trust avoids probate with respect to property “in trust.” For property to be “in trust,” it is necessary formally to transfer property to trust, typically involving renaming bank accounts in the name of the trustee and transferring real estate to the trustee. Typically the principal is trustee during the principal’s lifetime--nevertheless transfer must be made to the principal in his or her capacity as trustee. IF YOU EMPLOY A LIVING TRUST, MAKE SURE YOU FOLLOW UP AND TRANSFER INTENDED PROPERTY TO THE TRUST.

Even with a living trust, a property owner still requires a will--to address any property that has not been placed in trust (perhaps overlooked) and because, as an example, one may inherit property after passing and this property could never be placed in trust by the settlor.

Matters become more complicated, for instance, for families of children with special needs and families with children from prior marriage(s). The same documents are used in these circumstances, but the terms of the documents are necessarily more elaborate.

When you consider planning your estate, you may also consider a declaration of homestead and a directive as to remains (see links to the right).